Compare quotes from the top car insurance companies and save!

Physical damage coverage must be purchased in addition to state minimum requirements

Some lenders may prohibit borrowers from carrying high deductibles

Lenders must be listed as a loss payee on the auto policy for insurance to be accepted

Borrowers who fail to carry insurance will have to pay for forced-place lender insurance

When you sign a car loan agreement, you’re are agreeing that you’ll make your payments on time until the loan is officially paid off.

You’re also agreeing to a long list of other conditions that have been written into the contract to protect the lender from default or financial loss.

One condition that you’ll be asked to satisfy before you even drive off the lot with your new car is to buy insurance.

Since insurance protects the vehicle that the lender technically owns, the loan officer will almost definitely ask for proof of coverage on a vehicle that you own or on the vehicle you’ve just purchased.

Buying a basic policy, selecting the wrong deductibles, or structuring the policy wrong are all mistakes that can land you in hot water pretty quickly with the company that just gave you thousands of dollars.

Luckily, there’s a guide that can help you make informed decisions before you walk off the car lot uninsured and void your lending contract.

Can the lienholder mandate your coverage deductible?

It’s legal for the lienholder on the title to mandate how high your deductible can be.

If you’re tempted to take a $1000 or $2000 deductible to keep your premiums down, you should ask for permission first.

Generally speaking, a lender will allow deductibles up to $500 ensure that you can afford to file a claim.

How does the policy need to be structured to satisfy requirements?

It’s nice to know how the lender required coverage options work, but you might be wondering why this all matters when the carrier ultimately pays you for filed claims. In the insurance industry, the named insured does receive the final claims payout unless there’s a listed loss payee.

In the insurance industry, the named insured does receive the final claims payout unless there’s a listed loss payee.

A loss payee is an entity or person that is entitled to receive a claims payment before a check is issued to the named insured.

Lenders will protect themselves by requiring an insurance provision where the company must be designated as the loss payee complete with the company name, address, and loss payee clause.

It’s essentially like having a lien on your policy so that all claims are payable to the lender and the claims check must be signed off by the lender before it can be cashed.

Having the loss payee listed also keeps the lender in the loop by notifying the company when the policy renews, changes are made or when it cancels for non-payment.

What happens if you don’t buy required coverage?

If you don’t buy insurance, you’ll be in big financial trouble if you ever have a loss. You’ll have to find a way to repair the car and still keep your car payment up to date.

You’ll have to find a way to repair the car and still keep your car payment up to date.

While having a loss is the worst-case scenario, you can still pay the price when you don’t because the company can force-place insurance which bumps up the balance on your loan only to protect the lender.

If you don’t currently have the car insurance that you’re required to have on a financed vehicle, it’s time to update your policy. You should compare quotes with several insurers whenever you’re making such a major change.

You should compare quotes with several insurers whenever you’re making such a major change.

Be sure to use a rate comparison tool on the web and see what major insurers will charge you for full coverage.

FREE Car Insurance Comparison

Compare quotes from the top car insurance companies and save!

Secured with SHA-256 Encryption

Our Company

CarInsuranceComparison.com was created because we wanted to make it easy for anyone to compare car insurance online - from many different companies! Enter your zip code above to get your own personalized car insurance comparison from top auto insurance companies today!

Disclaimer: CarInsuranceComparison.com strives to present the most up-to-date and comprehensive information on saving money on car insurance possible. This information may be different than what you see when you visit an insurance provider, insurance agency, or insurance company website. All insurance rates, products, and services are presented without warranty and guarantee. When evaluating rates, please verify directly with your insurance company or agent. Quotes and offers are not binding, nor a guarantee of coverage.